1. The Actuary and the Risk Manager
Gary E. Bird
Director of Risk Management
Phelps Dodge Corporation

2. Introducing Actuarial Science to PDC
The 1990 Reserve Analysis (eye opener!)
Mid-year cost allocation adjustment
Need $6 million/$10 million in reserves
Bring in the actuary
Study all open claims (over 1000)
Three months of study and analysis
Result: $6 million/$10 million

3. Private Sector use of Actuaries
Fortune 500
large self-insured retention
Self-insured workers’ compensation
Casualty risks - loss development
Workers’ compensation/employers’ liability
General liability
Products liability
Auto liability
Not property losses, business interruption

4. Private Sector - Who Needs Reserve Position?
External Interests
Insurers - comfort with excess premium
State regulators - self-insured workers’ compensation
Captive regulators - solvency
Auditors - opinion on annual reports

5. Private Sector - Who Needs Reserve Position?
Internal Interests
Corporate accounting
Year-end reporting/SEC reporting
Monthly internal accounting
Risk Management
Budget/Allocation
Business units
Efficient use of working capital

6. Private Sector Uses and Applications
Regulators
Captive: Solvency measurements
Self-insurance: Security
Auditors - “test” reserves
Corporate functions
Finance/Treasury: preserve $ for re-investment
Accounting: reconciliation/SEC reporting

7. Private Sector-Timing of Actuarial Work
Management - ”good” numbers for budget
Accounting - year end closing
Auditors - annual reports
Captive - statutory reporting deadlines
Insurers - prior to renewal

8. Private Sector - Risk Manager Knows!
General liability loss projections (U.S.)
$2,000,000 per occurrence retention
Industry standard factors
Payroll - $400,000,000
Sales - $4,000,000,000
Production
1,800,000,000 lb. CU
1,000,000,000 lb. Carbon Black

9. Phelps Dodge Litigation History

10. Private Sector - Risk Manager Knows!
Texas Workers’ Compensation
History - $2,000,000 per year
Actuary - $2,000,000 per year
RM - $900,000 per year
Actual - less than $600,000 per year
Difference - Non-subscriber, administrator, great benefits and a waiver

11. Private Sector - Risk Manager Knows!
S.W. State - workers’ compensation
Actuary says $2,500,000 per year
RM says less than $1,800,000 per year
Who is running OHS
Plants seeking recognition
Assigned WC coordinator/nurse
Plant closures, job placement support